This invention relates generally to methods and systems for providing annuities with liquidity options and permanent legacy benefits. More particularly, the methods and systems of the present invention provide a policy owner with options that when elected or exercised allow the owner, which may or may not be the annuitant, or, in the case of the legacy benefit, the beneficiary to convert some or all of an annuity into a liquid asset, such as cash. Liquidity is used herein to generally denote enabling an individual to convert a portion or all of the value of a contract into a liquid asset. Legacy Benefit is used herein to generally denote a cash benefit payable to the policy owner's beneficiary or beneficiaries in the event of the annuitant's (or both annuitants') death.
Annuities are generally contracts that provide individuals with means to accumulate money and/or turn accumulated money into future income payments, for a predefined period of time, computed based on the life expectancy of one or more annuitants. The income payments may be guaranteed for the life or lives of the annuitants and/or for a term certain, such as 5, 10, 15, or 20 years. Annuities are typically purchased from insurance companies that offer a variety of options with regard to the manner in which the income payments are disbursed. Immediate annuities, for example, provide income payments that generally begin immediately or within one year of the contract date. Alternatively, deferred annuities, as the name applies, provide income payments beginning at a later date, such as at the date the owner selects as the annuitant's retirement date.
Although annuities are often a prudent investment strategy for many individuals due, for instance, to the lifetime payment guarantee and certain tax and spendthrift advantages above alternative investments, the lack of or limited liquidity associated with annuities during the payout phase may result in potential annuitants passing up annuities as an investment option. Currently, liquidity options appearing in annuities in the art typically include restrictions or limitations that either prevent or dissuade the annuitant from exercising the options to convert the annuity or a portion thereof into cash except in certain predefined and typically extenuating circumstances. For example, certain annuities include liquidity options in the form of accelerated benefits that allow annuitants diagnosed with a critical illness to elect to accelerate income payment in order to receive a lump sum benefit in lieu of future payments. Such accelerated benefits, however, do not provide liquidity for annuitants in other than life threatening circumstances and thus provide no measure of relief for annuitants that may need money for less extenuating circumstances.
Additionally, certain annuities provide liquidity by allowing annuitants to withdraw all or part of an amount of an applicable guaranteed minimum payment duration or total of payments, such as up to the paid premium or a portion thereof. However, since the amount of the withdrawal is generally limited to the value of the predetermined minimum payment duration or total, owners may find there is little remaining value to benefit from a withdrawal at precisely the time when their need for liquidity is more likely to arise.
Annuities further fail to provide adequate legacy benefits to beneficiaries after the annuitants die. An annuity purchaser has a variety of options regarding payments to beneficiaries. For example, periodic income payments to a selected beneficiary may commence after the annuitant of a single life-annuity dies. Alternatively, a lump sum distribution may be paid. Since, however, the payment or payments to the beneficiaries are typically based on a predetermined minimum payment duration or total, such as the amount of the paid premium or purchase price, and since the benefit to the beneficiaries is only the value remaining after any disbursements to the annuitant, the distribution to the beneficiary is not certain at least at the inception of the annuity. Annuitants interested in providing a lump sum legacy benefit to a beneficiary that is substantially certain at least at the inception of the annuity without resort to a separate life insurance policy may therefore also shy away from annuities as an investment option.
There is therefore a need for methods and systems for providing annuities with liquidity options that overcome the shortcomings associated with the liquidity options described above and legacy benefits that overcome the shortcomings associated with the legacy benefits that are currently available. A few computerized systems have been adopted in the art with respect to annuities, such as those described in U.S. Pat. No. 5,893,071, entitled “Annuity Value Software,” U.S. Pat. No. 5,933,815, entitled “Computerized Method and System for Providing Guaranteed Lifetime Income with Liquidity,” and U.S. Pat. No. 6,064,969, entitled “Flexible Annuity Settlement Proposal System,” each of which is hereby incorporated herein by reference. The systems and methods described therein do not, however, address and/or overcome the shortcomings associated with annuity liquidity and legacy benefits.